Land Value and Cost Approach for a townhouse?

[Ajax in CA]

I completed a townhouse appraisal for a purchase. I heard from the agent yesterday that the deal fell through because the buyer's employer has relocated him, and he is no longer going to buy the unit. Now I am being conditioned to do the land value and the cost approach, and to reconsider location adjustments even though I explained in the report my reasoning for not making any. The appraisal was turned in for review last Friday, and I received the conditions this afternoon. Two questions.
1. If the deal fell through, do I still need to address the conditions?
2. Do you do land value and the cost approach for townhouses?

 

[CGinMN]

1. Ask your client.
2. If it was part of the original engagement terms, then yes. But unless the client asks for it, I won’t develop the CA except for my own workfile, because it usually isn’t needed for credible assignment results. If your client is asking for post-engagement “add on” service, explain the added time and complexities and quote an appropriate fee.

 

[Ajax in CA]

1. Ask your client.
2. If it was part of the original engagement terms, then yes. But unless the client asks for it, I won’t develop the CA except for my own workfile, because it usually isn’t needed for credible assignment results. If your client is asking for post-engagement “add on” service, explain the added time and complexities and quote an appropriate fee.

Thank You!

 

[sputnam]

Your appraisal assignment is not ever conditioned on the fact of a deal closing. Your assignment was to develop and report an opinion of value in compliance with USPAP and any other regulatory guidelines, Client assignment conditions and guidelines, etc. There are only two legitimate reasons to omit an approach. 1- The approach is not applicable... and 2- The approach is not necessary for credible assignment results. Before the GSEs got their hooks in all of us, most appraisers developed the Cost Approach... that is, they didn't take the position it was unecessary. The GSEs made it clear that they only cared about Sales Comparison Analysis unless it was new construction. The fact is, properly completed, the Cost Approach has always been a valuable part of an appraisal. If for nothing else than as support for adjustments.

I agree... If it were part of your original assignment... you do it. If it the request is an add on, it is a change in the Scope of Work... that is, a new assignment. How much your additional fee is.. or whether you charge them an additional fee... is a business decision.

 

[Carnivore]

I completed a townhouse appraisal for a purchase.
2. Do you do land value and the cost approach for townhouses?

1. Finish the report collect your money

2. I assume when you say townhouse, you mean it is either SFR attached(interior - sharing two walls) or SFR semi-detached(end- sharing one wall).

3. Yes you develop the site value in the cost approach.

If you have Ala-commode software then you have corelogics cost service, it includes townhomes,

 

[Terrel L. Shields]

If town house, zero lot line, patio home, whatever you want to call it, then it has a land footprint...if it does not have a land foot print...ugh tough.
And costs are readily calculable and depreciation by reverse engineering the costs of your comps will lead to the effective age (remaining life calculation)

 

[Carnivore]

I could be all wet in my next paragraph, but the lenders only want to know this because they need to get a fire insurance policy for the closing statement. What I think is the fire policy just covers the interior and the exterior is a separate policy paid for by the HOA.

Since attached/semi-detached have site area they are not condo's. You can determine site value by extraction and or allocation. You could be lucky and find land sales, because of the low area sft this is not likely. Plus the subject site value is influenced by the amenities of the development. Where your lot/land sales most likely may not/do not have that influence.

What you don't do is use the County Assessors site value. That value is determined under the Mass Appraisal USPAP Standard 5 & 6

Oh well I do the best I can with whatever data is available for the specific assignment.

 

[Tom D]

you didn't say if the townhouse was urban or suburban. makes it urban difficult when there hasn't been a land sale in a hundred years. if i really, really, needed a land sale i would also look under public records. not all land sales go thru the MLS. something minimal is better than backing into it.

 

[Salty]

I had a client say I need to provide cost approach 2 weeks after I submitted the report. I explained this approach was not requested in the engagement letter and it was not necessary for a credible report. I also explained that had the cost approach been requested initially, I would not have taken the assignment.

 

[Tawfik Ahdab]

I work in a small market area with diverse types of housing. In my local experience there are never any individual townhome lot sales. Lots are built upon by the developer and they are not sold individually in the open market because the typical purchasers in my market area do not buy such lots to build individual Attached housing units upon. That may be different in established And densely developed neighborhoods/market areas, but in my market area there has never been a single individual townhome lot sold. So what do you do?

In the absence of such sales, You can readily appeal to the assessed value as being the sole indicator that you can refer to for support. It’s not your opinion of the site value based on vacant land/site sales but it is a supported opinion of site value insofar as it is based or premised on a publicly published source. Whether it is the actual market value or not May not readily be discernible or accurate, but the opinion of site value is at least supported by Reference to The tax assessors site value allocation You can cite that as the basis for your opinion/statement of site value In the absence of actual vacant site sales With the caveat that the cost approach is not reliable on account of this very limitation.